Use the Following Information to Answer the Question(s)below

question 68

Multiple Choice

Use the following information to answer the question(s) below.
Nielson Motors has a share price of $50.00.Its dividend was $2.50,and you expect Nielson Motors to raise its dividend by approximately 6% per year in perpetuity.
-If Nielson's equity cost of capital is 13%,then Nielson's expected share price is closest to:

• A)$19.23.
• B)$37.86.
• C)$35.71.
• D)$50.00.

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Definitions:

Non-Interest-Bearing Note

A promissory note or loan agreement that does not accrue interest over its duration.

Present Value

The contemporary valuation of a sum of money to be received in the future or ongoing cash flows, using a specific return rate.

Sales Revenue

The total amount of money received by a company from its sales of goods or services, before any expenses are subtracted.

Premium On Bonds Payable

The amount by which the selling price of a bond exceeds its face value, representing an additional cost to the issuer over the bond’s life.